Correlation Between RS Public and LH Financial

Can any of the company-specific risk be diversified away by investing in both RS Public and LH Financial at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining RS Public and LH Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between RS Public and LH Financial Group, you can compare the effects of market volatilities on RS Public and LH Financial and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in RS Public with a short position of LH Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of RS Public and LH Financial.

Diversification Opportunities for RS Public and LH Financial

0.73

Correlation Coefficient

RS Public  LH Financial

Poor diversification

The 3 months correlation between RS Public and LHFG is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding RS Public and LH Financial Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LH Financial Group and RS Public is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on RS Public are associated (or correlated) with LH Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LH Financial Group has no effect on the direction of RS Public i.e., RS Public and LH Financial go up and down completely randomly.

Pair Corralation between RS Public and LH Financial

Assuming the 90 days horizon RS Public is expected to under-perform the LH Financial. But the stock apears to be less risky and, when comparing its historical volatility, RS Public is 1.44 times less risky than LH Financial. The stock trades about -0.24 of its potential returns per unit of risk. The LH Financial Group is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest  81.00  in LH Financial Group on October 6, 2024 and sell it today you would lose (3.00) from holding LH Financial Group or give up 3.7% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	97.56%
Values	Daily Returns

RS Public  vs.  LH Financial Group

RS Public

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days RS Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's fundamental drivers remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

LH Financial Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days LH Financial Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's forward-looking signals remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with RS Public and LH Financial

The main advantage of trading using opposite RS Public and LH Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if RS Public position performs unexpectedly, LH Financial can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in LH Financial will offset losses from the drop in LH Financial's long position.

The idea behind RS Public and LH Financial Group pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.